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NGA/NASBO: More States in the Green, but Facing Fiscal Challenges
The latest Fiscal Survey of States reveals that many states still face tough budget challenges, despite the fact that extreme revenue shortfalls of the past have subsided. The survey, which measures the fiscal health of states, is conducted semi-annually by the National Association of State Budget Officers (NASBO) and the National Governors Association (NGA).
Forty-two states saw revenues exceed original budget obligations in fiscal year 2005. Five - Indiana, Michigan, Missouri, Ohio and Rhode Island - fell below budget projections and made mid- or end-year corrections.
Ten are projecting negative growth in FY 2006: Alaska, Maine, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, Nevada, West Virginia and Wyoming.
In FY 2005, resurgent revenue growth was tempered by a backlog of expenditure demands, the after-effects of the federal fiscal relief package, and general spending increases in nearly all major program areas, the report observes. Medicaid expenditures caused the most strain to budgets, and that is expected to continue in FY06. Medicaid costs exceeded expectations in 30 states by an average of 3.7 percent.
Aggregate state spending in FY05 was more in line with historical spending, growing at 6.6 percent above prior-year levels, according to the report. Five states reduced FY05 enacted budgets by $6.3 million, significantly fewer than in previous years. Also, within the state-spending category, five states reported negative expenditure growth in FY05. The report indicates that this is a dramatic improvement over 2003, during which time 21 states enacted negative-growth budgets.
The survey, which assembles data reported by states on their general budgets, reports specifically on state spending, state revenue actions, and year-end balances. According to NGA, states used a combination of layoffs, furloughs, early retirement, reductions to local aid, and reorganization of programs to balance their budgets in FY 2004.
Fiscal Survey of States is available from NASBO at http://www.nasbo.org .